SME financing: special focus

By: Published on: Monday, November 21, 2016

The vexed battle to finance small and medium-sized enterprises (SMEs) continues in the eurozone and UK amid risk aversion, economic weakness, new regulations and banks’ balance-sheet repair. Project Merlin, Funding for Lending, Agency for Business Lending (ABL) and Breedon Report recommendations all aim to increase financing for SMEs. Here is a round-up of Euromoney's recent coverage.

Banks should look beyond the fintech threat to
modernize
October 2016
Banks are very concerned about how emerging fintech firms will
take a slice of their business, according to
Misys’ white paper 'Digitization in corporate
banking – new rails for revenue growth'. SME
lending was considered under threat by 68% of banks, with 61%
believing supply chain finance was being pressured by the new
entrants.

Financial inclusion: Biometric banking and the $600 billion
opportunity
September 2016
An extraordinary revolution is taking place in digital banking
in India. Driven by the state, it is anchored on a
billion-strong biometric database to finally bring financial
inclusion to a country that needs it more than any other. Banks
may face a binary outcome: be quick or be dead.

Emerging Europe: EBRD keeps its appetite for risk
September 2016
"In most of the EBRD region, banking is still a
bricks-and-mortar business," says Nick Tesseyman, the
EBRD’s head of financial institutions. "You
can’t reach SMEs unless you have a branch
network."

Technology is finally bringing banking services to the unbanked
in both developing and developed markets. While technology
companies are driving this transformational shift, it looks
increasingly likely that traditional banks will ultimately be
service providers. They have everything to gain if they can
form partnerships and create a long-term strategy.

When microfinance banks in Africa speak of the rise of new
technology, they usually focus on its potential and, perhaps
disingenuously, play down the risks. They say the spread of
mobile phones and internet access enables small loans to reach
Africa’s rural poor more efficiently than ever
before. But while international microfinancier Finca is aware
of these opportunities, it knows from painful experience in
Uganda that new technology opens up new vulnerabilities
too.

Bank collaboration with P2P platforms rising
September 2016
Banks are beginning to work more closely with peer-to-peer
(P2P) lenders, which at first looked like a threat, to find
mutually beneficial ways to serve small corporate
borrowers.

Nationalism: Could digital technology offer hope for a new era
of financial interconnectivity?
September 2016
In 2010, The World Bank estimated there were around 125 million
small and medium-sized enterprises in the world. By 2013 some
25 million of these were active on Facebook. Today Facebook
reports 50 million SME users. In the US, the share of exports
by large multinational corporations dropped from 84% in 1977 to
50% in 2013. Among SMEs that export, the smallest –
those with fewer than 50 employees – are gaining share
the fastest, McKinsey finds.

Tech innovation bridges growing SME inequality
July 2016
The sharp divergence in availability of financing for SMEs is
increasing, according to new data from Misys. With growing
inequality, technology is being leveraged to try to bridge the
gap.

"While SMEs have historically had to rely on the big banks for
any sort of financial service, genuine innovation and
technological development from the fintech sector has given
rise to a wide range of truly compelling alternatives."

Tesco late payments: a case of old-fashioned bargaining
power?
February 2016
Tesco recently made headlines after being found to have
deliberately delayed payments to its suppliers. In a statement
released in response to the findings, Tesco said the company
had undertaken a review of its practices and made changes,
including creating a dedicated supplier helpline to address
issues within 48 hours, and introducing 14-day payment terms
for UK-based SMEs.

MPS securitization beats bad debt, bail-in rout
February 2016
Italy’s third biggest bank, Monte dei Paschi di
Siena (MPS) sold the majority of a €1.6 billion
securitized SME lease portfolio in January, just as concern
over Italian SME lending was at the sharp end of a renewed bout
of volatility in Europe.

SME banking has been a top priority for Turkish lenders since
the country’s regulator called time on the
consumer boom in late 2013. Can the segment keep its cool in
the face of rising local economic and political
pressures?

Citi's top TS banker eyes SME support
April 2015
Naveed Sultan, global head of treasury and trade solutions
(TTS) at Citi, explains the importance of developing SME and
MME financing options, as the clout of transaction services to
Citi's business strategy grows.

Does Europe need its own private placement market?
March 2015
Private placements have usurped securitization as
Europe’s great SME financing hope. The financial
markets support EU commissioner Jonathan Hill’s
Capital Markets Union initiative to promote it. But the
thriving US market will be hard to compete with, let alone
replicate. Which leaves two questions: Can the EU build it?
And, even if it can, will issuers and investors come?

Financial technology: Snowflake unlocks markets for intangible
assets
March 2015
Innovation is held back by the gap between the old financial
system, investing and lending primarily against hard assets,
and the new knowledge economy that depends on intangible
assets. A new type of bank could benefit SMEs seeking to
develop innovative products. It could also give investors the
chance to redeploy speculative capital more productively. But
who is the driving force behind Snowflake?

EBRD: supporting SMEs
May 2014
Although the SME sector is frequently cited as a potential
growth driver by bankers in emerging Europe, providing funding
to smaller firms can be problematic for traditional lenders,
particularly in the aftermath of recession and at a time when
western European parent banks are under pressure to repair
balance sheets.

Sepa threatens to induce SME cash-flow squeeze
February 2014
European
companies, and particularly small and medium-sized enterprises
(SMEs), could yet suffer a cash-flow squeeze from direct debits
under the Single Euro Payments Area (Sepa) regulation, despite
the European Commission handing companies an extra six months
to comply.

Supply chain finance presents an opportunity to SMEs
February 2014
Supply
chain finance (SCF) is typically the preserve of large
companies with hundreds of suppliers, but signs are emerging
this type of short-term financing is beginning to be embraced
by small and medium-sized enterprises (SMEs) too.

In the spotlight: Financing European
SMEsJanuary
2014
Small and medium-sized enterprises are meant to be the machine
that drives Europe’s growth-free markets to
recovery. But each country’s environment for SME
funding remains even more disparate than their economies.

ECB battles Basel rules in war for SME
finance
December 2013Euromoney investigates whether the need to stimulate
European SME financing will finally soften the regulatory
treatment of ABS, which has now been deemed by the European
Commission the vehicle through which the growth of bank lending
can best be achieved.

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